Question:
Why is it I never hear anyone talk about the full cost of owning a home and why its such a poor investment? By the time you pay all the fees, taxes, upkeep, interest, insurance and figure in lost investment value people will never make a dime. In fact, the house will cost double what you originally paid. It also ties people down to a certain area and helps keep them immobile. Why is it we never hear about the full and true costs of home ownership? Could it be that is not good for the economy?
-Great Bunndini
Response:
Carmen Wong Ulrich Aug 25, 2013 Former Host
Great Bunndini — I do talk about this, a lot! Check out the chapter on owning a home in my most recent book, The Real Cost of Living. I present the real costs of homeownership, of which there are so many. I tend to be a rogue when it comes to home ownership as I’ve found that too often, even before the recession, it’s touted as the best investment you could ever make. Tell that to the millions of Americans who are still underwater and though they live in their homes, actually own nothing. Home buying is a big business–the government even encourages it–but for many, it is far from a solid investment. There are all the additional costs you mention–property taxes, home insurance, flood/disaster coverage, maintenance, emergency repairs, etc. In essence, it’s like owning one piece of stock in one company, in one neighborhood, city, state, country and housing market. And this market is well beyond our control.
Sure, I’d like you to own a home. But I want you to not only own it but be able to keep it and make a return on your investment. That means buying right. Buy only when you have ample savings not only for the down payment (don’t put down too much money–share some risk with the bank) but for an emergency fund in case you lose your job. Plus you’ll want a great credit score,so you can get the lowest rates and buy less house than you can afford. Yup, less. That will leave you room for other expenses such as kids, retirement, unemployment, etc.
As for renting, yes, it can keep you fairly mobile and there’s much less upkeep. But some rental markets have blown up in price. And keep in mind you’re then at the mercy of a landlord. You may have to move if the landlord sells.
There are few housing options without risk or cost. It’s a matter of knowing the full picture–the real cost, so you can reap real rewards.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
